A zero ledger balance does not end the disclosure search
Ind AS 24 paragraphs 18 and 21 include commitments in the related-party disclosure analysis, including recognised and unrecognised executory contracts. Required information covers the relationship, transactions, balances, terms and guarantees as applicable. This guide, checked on 27 October 2026 using ICAI’s compendium and the subsequent 2026 amendment notification, focuses on commitment completeness for Ind AS reporters rather than KMP compensation or the government-related exemption. ICAI Ind AS 24: paragraphs 18–24A.
Search contracts as well as account balances
Obtain the related-party population and inspect purchase orders, service agreements, financing arrangements, guarantees and other commitments that remain relevant at reporting date. Separate signed obligations, options, unapproved proposals and cancelled arrangements based on their actual legal terms. This is a suggested completeness procedure, not a rule that every budget creates a commitment.
Keep different measures in separate columns
Track original contract value, performance already completed, recognised payable or receivable, advances, unperformed commitment and guarantee exposure. Do not add all of them into one purported liability. A guarantee covering a contract can overlap its underlying exposure, while the disclosure still needs to explain the guarantee. Recognition and measurement under other standards remain separate questions.
Disaggregate enough to explain the relationship
Paragraph 19 separates related-party categories. Paragraphs 24 and 24A allow appropriate aggregation of similar items without obscuring significant transactions. Retain party and transaction detail beneath the note and distinguish goods, services and fixed-asset dealings. A group total that reconciles numerically can still obscure an individually material arrangement.
Do not turn disclosure into an unsupported measurement conclusion
An arm’s-length equivalence statement under paragraph 23 requires substantiation; a management label alone is insufficient. Likewise, describing a commitment does not determine whether a provision or financial liability is recognised. Review those questions under the applicable standards. Document applicable confidentiality restrictions and any government-related exemption separately rather than removing all related-party commitments by default.
Applicable primary references
ICAI Ind AS 24: paragraphs 18–24A MCA Gazette notification, 12 August 2026: subsequent Ind AS amendments
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Unperformed contract
A related-party purchase contract is ₹10,00,000. Goods worth ₹4,00,000 have been delivered; ₹1,00,000 of that delivered amount is unpaid. On these simple fixed-price facts, unperformed purchases are ₹6,00,000 and the recognised payable is ₹1,00,000. Do not call the full ₹10,00,000 an additional payable.
Illustrative example 2: Advance does not equal performance
A ₹5,00,000 contract remains wholly unperformed and a ₹1,00,000 advance is paid. The contractual goods commitment is still ₹5,00,000, while cash remaining under the assumed terms is ₹4,00,000 and the advance is separately recognised. Explain the basis rather than silently substituting one measure for another.
Illustrative example 3: Cancellation adjustment
Opening unperformed commitment is ₹8,00,000; a valid ₹2,00,000 cancellation takes effect before reporting date and ₹3,00,000 is performed. Closing unperformed commitment is ₹3,00,000. Assume no cancellation charge and retain the effective cancellation evidence.
Illustrative example 4: Guarantee overlap
An entity guarantees ₹3,00,000 of a related party’s ₹5,00,000 borrowing. The guarantee amount is ₹3,00,000, or 60% of the underlying principal. Adding ₹5,00,000 and ₹3,00,000 as if they were independent borrower principal exposures would misdescribe the model; explain the guarantee and underlying relationship separately.
Illustrative example 5: Party categories
Unperformed purchases are ₹2,00,000 with the parent, ₹1,50,000 with an associate and ₹50,000 with another related party. Total is ₹4,00,000, but preserve the three paragraph 19 categories rather than reporting only the total.
Illustrative example 6: Completeness gap
Twenty relevant signed contracts are identified. Seventeen appear in the note working and three are omitted. Completeness coverage is 85%. If the omitted unperformed amounts are ₹20,000, ₹30,000 and ₹50,000, the missing working population totals ₹1,00,000; assess the actual disclosure required rather than treating 85% as acceptable.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm Ind AS and reporting date | Framework and period |
| 2 | Validate related-party population | Relationship evidence |
| 3 | Search signed arrangements | Contracts, orders and guarantees |
| 4 | Separate proposals and cancellations | Status and effective-date evidence |
| 5 | Measure performance to date | Delivery or service records |
| 6 | Reconcile recognised balances | Ledger and confirmation |
| 7 | Identify unperformed commitments | Contract-to-performance bridge |
| 8 | Explain guarantees and overlap | Terms and exposure mapping |
| 9 | Apply categories and disaggregation | Paragraph 19 and significance assessment |
| 10 | Review wording and retain evidence | Substantiated claims and final note |
Sixteen practitioner FAQs
1. Can a party with no invoice balance still matter?
Yes. Inspect relevant commitments and relationships rather than closing the search at the ledger.
2. Are all budgets contractual commitments?
No. Determine the nature and enforceability of the actual arrangement.
3. Are executory contracts relevant?
Paragraph 21 expressly includes recognised and unrecognised executory contracts in its examples.
4. Does disclosure automatically require liability recognition?
No. Recognition and measurement require the relevant other standards.
5. Why separate the original contract and remaining amount?
They answer different questions and can otherwise cause double-counting.
6. Does an advance necessarily reduce the unperformed goods quantity?
No. Payment and performance differ; state the basis of the commitment measure.
7. How should cancelled amounts be handled?
Verify effective cancellation and any residual obligations before removing them.
8. Should a guarantee simply be added to underlying principal?
Explain coverage and overlap rather than presenting a misleading combined exposure.
9. What terms matter for balances?
Paragraph 18 includes terms, security, settlement consideration and guarantees as applicable.
10. Can every related party be placed in one category?
Apply the separate categories in paragraph 19.
11. May similar items be aggregated?
Only to the extent appropriate without obscuring significant transactions and necessary understanding.
12. Can goods and fixed-asset transactions be merged indiscriminately?
Paragraph 24A cautions against aggregation that obscures their differing nature.
13. Is an arm’s-length statement automatic?
Paragraph 23 permits it only when the equivalent terms can be substantiated.
14. Does this article apply the government-related exemption?
No. Analyse that limited exemption separately if relevant.
15. Are confidentiality claims unrestricted?
No. The standard addresses specific statutory or regulatory duties; establish the actual basis.
16. What should the reviewer receive?
A relationship and contract population linked to balances, commitments, guarantees, categories and final wording.
Conclusion
Look beyond posted invoices to identify related-party commitments, distinguish them from recognised balances and avoid double-counting guarantees and contract values.